Friday, August 19, 2011

Buffet, The Super-Rich and Taxes

After reading a recent New York Times article by Warren Buffet (whom I like to affectionately refer to as Warren Buffoon) titled Stop Coddling the Super-Rich, I immediately thought "Yes, please do stop coddling super-rich tax-policy dilettantes by giving them platforms like the NY times to vent their opinions on matters which they demonstrate not the slightest understanding of."

If that sounds harsh, it's meant to be. After all, Buffet possesses no credentials on this particular subject that would render his opinion any more valuable than some member of the super-poor who thinks the super-rich should pay even less in taxes than they do. But because he's a prominent figure, and because he's advocating a policy that goes against his own self-interests, it's imagined that his opinion should be given special consideration. And I might even agree with this, if the substance of what he had to say wasn't so absurd. For starters:

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off.

Frankly, this demonstrates clearly that Buffet doesn't even understand what the theory in question states. The theory is not that they'll cease investing completely, but that higher tax rates on gains will affect the risk/reward calculus and will render certain investments (not all of them) unprofitable that otherwise would have been. This is not really a contested theory so much as a completely obvious fact, despite Buffet's encyclopedic knowledge of all the investments that people he knows didn't make -- which he doesn't actually have. His assertion as to the behaviors of he and his peers is anecdotal and irrelevant, not to mention very likely not even true.

It's highly doubtful that there exists a single super-rich person who will make an investment knowing that it is rendered unprofitable because of higher tax rates on the earnings. Granted, said super-rich person would probably never cite capital gains taxes as the reason for his not making the investment, and it's possible he might not even consciously consider them, but this doesn't mean they are not a factor in his decision. Because taxes are a variable that are out of his direct control, and because they remain fixed for extended periods of time, it's quite possible to never speak -- or even think -- of them and still have them affect your economic decisions and behavior. Buffoon is foolish enough to think that this lack of testimony amounts to a lack of influence on behavior, which is clearly mistaken.

And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Yes, 1980-2000 saw such an increase in job creation largely due to a historic reduction in taxes, primarily on the top earners, that took place when Reagan entered office in the early 80s. As opposed to the comparatively small decrease of the Bush tax cuts, and their continuation under Obama. Admittedly, though, tax cuts don't function properly when accompanied by out of control spending and debt, which are the actual culprit here.

The one saving grace of the piece is that Buffet has the decency to limit his proposal for increased taxes to the millionaire club, rather than Obama's quarter-millionaire club. Still, this isn't a feasible solution to our dilemma, and it's an unjust one.

Should rich people in this country, especially super-rich people, do even more than they are to help the poor? Certainly, and Buffet and all of his friends are completely free to give as much of their wealth to the federal government as they wish at any time. I understand Mr. Buffet is quite charitable with his money already, and God bless him for that. Why he would want to redirect his charitable efforts away from the needy, and away from reputable charities, to the federal government -- a most disreputable steward of his money -- is anyone's guess. But he's free to do so at any time. Your tax burden was only 17%? Increase it voluntarily, then, if it pleases you. Convince all your mega-rich pals to do the same. Please don't make it a requirement though, some people want to actually do productive things, possibly even good things, with their money.

That would be something if he did. Cite said credentials, please. I admittedly have none, and was under the impression Buffet has none w/r/t tax policy either, but he might. Though, even if he did he would still be mistaken on this matter and I'd still be right.